• Aug 12, 2017 Property shortage expands to rental market
    Gary Sandler
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    Published 12 August 2017

    LAS CRUCES – A shortage of properties has been plaguing the Las Cruces home sales market and driving up prices for the better part of a year. The same fate has now befallen the local residential rental market. As a result, rental properties are becoming scarce and rental rates are on the rise. “More U.S. households are renting than at any point in 50 years,” according to a July 19 report from the Pew Research Center. The report also noted that the number of individual U.S. households that have chosen to rent rather than own increased significantly between 2006 and 2016, rising to 36.6 percent from 31.2 percent.

    “New Mexico is following the national trend as renting is becoming part of the American dream,” said Kelle Senyé, executive director of the Apartment Association of New Mexico. A sampling of owners and managers of the 60,000 rental units operated by association members showed that 40 percent of New Mexico households are currently renters. The survey also revealed that the average occupancy rate for the 2,665 rental units included in the survey is currently at 96.47 percent. An unscientific survey of four Las Cruces area property managers, who together manage more than 1,300 rental units, confirmed that good rental properties are becoming more difficult to find.

    “Rental rates are up significantly,” said Dominic Boutelle, qualifying broker for Doña Ana Properties in Las Cruces. “Our occupancy rate is currently at 99 percent.”

    Delores DeMers, qualifying broker at Good Earth Real Estate, agrees. “Our rental market is moving fast, with more demand for fewer and fewer properties. Only 5 percent of our inventory is currently vacant,” said DeMers. The local property manager also noted that the market momentum has changed from just three or four years ago, when rental rates had to be reduced to attract tenants.

    Alan Chastine, principal and qualifying broker at Las Cruces-based Pinnacle Management Group, attributes some of the increase in rental rates to the higher cost of doing business. “Higher insurance premiums, property taxes, utility rates, and the cost of materials used to maintain rental properties are squeezing profits and contributing to higher rental rates,” said Chastine, who refers to the under-the-radar costs as “hidden inflation.”

    The federal government is also aware of the increase in rates and has raised the allowable rents for properties that Las Cruces-area tenants who receive rent subsidies typically occupy. Maximum rents for efficiency, one- and two-bedroom apartments increased by an average of 5.5 percent over the past year, with rents for three- and four-bedroom homes rising by 6.5 and 8.4 percent, respectively.

    So, what can be done to relieve the shortage of properties?

    “The Las Cruces market has historically been able to absorb the addition of 200 to 250 additional rental units per year,” said local developer, Eddie Binns. Two developers are already planning to fill the void, according to Las Cruces Community Development Director, David Weir. Dillion Mountain Enterprise, LLC, has recently pulled a permit for a 128-unit complex at 3402 Bixler Drive, and Horseshoe Investment Partners, LLC, has pulled a permit for the first 136-units of a 300-unit development at 2050 Wyoming Avenue, close to New Mexico State University.

    Rising rental rates will translate to higher values for investment properties, so Las Crucens who have been thinking about purchasing a duplex, triplex, fourplex or single-family home as a long-term investment would be wise to consider making their purchase sooner, rather than later.

    See you at closing!

    Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He can be reached at 575-642-2292 or Gary@GarySandler.com

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      Gary Sandler